Vol 20 (2023) - Issue 4

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The Rise of Early Warning Tools and Key Challenges for Policy Makers

Synopsis
In the context of proliferation of pre-insolvency procedures during the past 10 years, the recent entry into force (and related transposition) of the EU Directive 2019/ 1023,2 has brought into the spotlight of lawmakers another innovative feature aimed at saving distressed enterprises, namely a new generation of early warning tools that detect financial difficulties as early as possible, encouraging businesses to take early action to avoid insolvency. After briefly illustrating the philosophy underpinning the introduction of early warning tools as defined by the EU Directive and the different objectives of an alert system for the benefit of the debtor only, this article explores the many open questions before policy makers and other relevant stakeholders who explore the concept of early warning tools with the view of introducing them into their system.